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					March 2012

Electronic Banking
F    or many consumers, electronic banking means
     24-hour access to cash through an automated
teller machine (ATM) or Direct Deposit of
                                                      Electronic Fund Transfers
                                                      EFTs offer several services that you may find
paychecks into checking or savings accounts. But
                                                       QQ   ATMs are electronic terminals that let you
electronic banking involves many different types
                                                            bank almost any time. To withdraw cash,
of transactions.
                                                                       make deposits, or transfer funds
Electronic banking, also known                                         between accounts, you generally
as electronic fund transfer (EFT),                                     insert an ATM card and enter your
uses computer and electronic tech-                                     PIN. Some financial institutions
nology as a substitute for checks                                      and ATM owners charge a fee,
and other paper transactions. EFTs                                     particularly if you don’t have ac-
are initiated through devices like                                     counts with them or if you engage
cards or codes that let you, or those                                  in transactions at remote locations.
you authorize, access your account.                                    Generally, ATMs must tell you
Many financial institutions use                                        they charge a fee and its amount on
ATM or debit cards and Personal                                        or at the terminal screen before you
Identification Numbers (PINs)                                          complete the transaction. Check
for this purpose. Some use other                                       the requirements with your institu-
types of debit cards such as those that require, at         tion and at ATMs you use for more informa-
the most, your signature or a scan. For example,            tion about these fees.
some use radio frequency identification (RFID)
                                                       QQ   Direct Deposit lets you authorize specific
or other forms of “contactless” technology that
                                                            deposits, (like paychecks and Social Security
scan your information without direct contact. The
                                                            checks and other benefits) to your account
federal Electronic Fund Transfer Act (EFT Act)
                                                            on a regular basis. You also may pre-authorize
covers some electronic consumer transactions.
                                                            direct withdrawals so that recurring bills (like
                                                            insurance premiums, mortgages, utility bills,
2 FTC Facts For Consumers

     and gym memberships) are paid automatically.            through fraud. Your liability for unauthorized
     Be cautious before you pre-authorize direct             use, and your rights for error resolution, may
     recurring withdrawals to pay companies you              be different for a debit card than a credit card.
     aren’t familiar with; funds from your bank
                                                        QQ   Electronic Check Conversion converts a paper
     account could be withdrawn improperly. Also
                                                             check into an electronic payment in a store
     monitor your bank account to ensure that
                                                             or when a company receives your check in
     direct recurring payments from your account
                                                             the mail.
     to others are for the correct amount.
                                                             When you give your check to a cashier in a
QQ   Pay-by-Phone Systems let you call your
                                                             store, the check is run through an electronic
     financial institution with instructions to pay
                                                             system that captures your banking informa-
     certain bills or to transfer funds between ac-
                                                             tion and the amount of the check. You’re
     counts. You must have an agreement with the
                                                             asked to sign a receipt and you get a copy for
     institution to make such transfers.
                                                             your records. When your check is handed
QQ   Personal Computer Banking lets you handle               back to you, it should be voided or marked
     many banking transactions via your personal             by the merchant so that it can’t be used again.
     computer. For instance, you may use your                The merchant electronically sends information
     computer to view your account balance,                  from the check (but not the check itself ) to
     request transfers between accounts, and pay             your bank or other financial institution, and
     bills electronically.                                   the funds are transferred into the merchant’s
QQ   Debit Card Purchase or Payment Transactions
     let you make purchases or payments with a               When you mail-in a check for payment to a
     debit card, which also may be your ATM card.            merchant or other company, they may elec-
     This could occur at a store or business, online,        tronically send information from your check
     or by phone. The process is similar to using a          (but not the check itself ) through the system,
     credit card, with some important exceptions.            and the funds are transferred from your ac-
     While the process is fast and easy, a debit card        count into their account. For a mailed check,
     purchase or payment transfers money – fairly            you should still receive advance notice from
     quickly – from your bank account to the                 a company that expects to send your check
     company’s account. So it’s important that               information through the system electronically.
     you have funds in your account to cover your            For example, the merchant or other company
     purchase. This means you need to keep accu-             might include the notice on your monthly
     rate records of the dates and amounts of your           statement. The notice also should state if the
     debit card purchases, payments, and ATM                 merchant or company will electronically col-
     withdrawals. Also be sure you know the store            lect from your account a fee – like a “bounced
     or business before you provide your debit card          check” fee – if you have insufficient funds to
     information to avoid the possible loss of funds         cover the transaction.
                                                                      FTC Facts For Consumers 3

Be especially careful with online and telephone     or merchant about any protections offered for
transactions that may involve use of your bank      these cards.
account information, rather than a check. A
legitimate merchant that lets you use your bank     Disclosures
account information to make a purchase or pay       To understand your legal rights and responsibili-
on an account should post                           ties regarding your EFTs, read the documents you
information about the                                                         receive from the financial
process on their website        Be especially careful with online institution that issued
                                                                              your “access device.”
or explain the process over
the phone. The merchant            and telephone transactions                 That is, a card, code or
also should ask for your                                                             means
                                  that may involve use of your otheraccountof accessing
                                                                              your           to initiate
permission to electroni-
cally debit your bank ac-          bank account information,                  electronic fund transfers.
count for the item you’re                                                     Although the means
                                        rather than a check.                  varies by institution, it
purchasing or paying on.
However, because online                                                       often involves a card and/
and telephone electronic debits don’t occur face-                             or a PIN. No one should
to-face, be cautious in revealing your bank account know your PIN except you and select employees
information to others. Don’t give this information of the financial institution. You also should read
to sellers with whom you have no prior experience the documents you receive for your bank account,
or with whom you have not initiated the call, or to which may contain more information about EFTs.
companies that seem reluctant to provide infor-     Before you contract for EFT services or make your
mation or discuss the process with you. Also check first electronic transfer, the institution must give
your bank account regularly to be sure that correct you the following information in a form you can
amounts were transferred.                           keep.
Not all electronic fund transfers are covered by the   QQ   A summary of your liability for unauthorized
EFT Act. For example, some financial institutions           transfers.
and merchants issue cards with cash value stored
electronically on the card itself. Examples include    QQ   The telephone number and address of the
prepaid phone cards, mass transit passes, and some          person to be notified if you think an unau-
gift cards. These “stored-value” cards, as well as          thorized transfer has been or may be made, a
transactions using them, may not be covered by              statement of the institution’s “business days”
the EFT Act, or they may be subject to different            (which is, generally, the days the institution is
rules under the EFT Act. (See Buying, Giving                open to the public for normal business), and
and Using Gift Cards at This             the number of days you have to report sus-
means you may not be covered for the loss or                pected unauthorized transfers.
misuse of the card. Ask your financial institution
4 FTC Facts For Consumers

 QQ   The type of transfers you can make, fees for    pre-authorized transfers from your account, and
      transfers, and any limits on the frequency and  a copy of that authorization must be given to you.
      dollar amount of transfers.                     Additional information about pre-authorized
                                                                               transfers is in your contract
 QQ A summary of your right
                                                                               with the financial institu-
    to receive documenta-
    tion of transfers, to stop
                                   Keep and compare your EFT tion for that account. You’re
    payment on a pre-
                                                                                            a terminal
                                     receipts with your periodic entitled toyou initiatereceipt
                                                                               each time                an
    authorized transfer, and
    the procedures to follow
                                   statements the same way you electronic transfer, whether
                                                                               you use an ATM or make
    to stop payment.                  compare your credit card                 a point-of-sale electronic
 QQ A notice describing the          receipts with your monthly transfer. The receipt must
    procedures you must fol-                                                   show the amount and date
                                         credit card statement.                of the transfer, and its type,
    low to report an error on
    a receipt for an EFT or                                                    such as “from savings to
    your periodic statement,                                                   checking.” When you make
    to request more information about a transfer      a point-of-sale transfer, you’ll probably get your
    listed on your statement, and how long you        terminal receipt from the salesperson.
    have to make your report.
                                                      You won’t get a terminal receipt for regularly
 QQ A summary of the institution’s liability to you   occurring electronic payments that you’ve pre-
    if it fails to make or stop certain transactions. authorized, like insurance premiums, mortgages,
                                                      or utility bills. Instead, these transfers will appear
 QQ Circumstances under which the institution
                                                      on your periodic statement. If the pre-authorized
    will disclose information to third parties        payments vary, however, you should receive a
    concerning your account.                          notice of the amount that will be debited at least
 QQ A notice by operators of ATMs where you           10 days before the debit takes place.
      don’t have an account that you may have to       You’re also entitled to a periodic statement for
      pay a fee for an EFT or a balance inquiry at     each statement cycle in which an electronic trans-
      the ATM.                                         fer is made. The statement must show the amount
In addition to these disclosures, you will receive     of any transfer, the date it was credited or debited
two other types of information for most trans-         to your account, the type of transfer and type of
actions: terminal receipts and periodic state-         account(s) to or from which funds were trans-
ments. Separate rules apply to deposit accounts        ferred, and the address and telephone number for
from which pre-authorized transfers are drawn.         inquiries. You’re entitled to a quarterly statement
For example, you must provide authorization            whether or not electronic transfers were made.
that is written or similarly authenticated for
                                                                      FTC Facts For Consumers 5

Keep and compare your EFT receipts with your           an error within one business day after determining
periodic statements the same way you compare           that the error has occurred. If the institution needs
your credit card receipts with your monthly credit     more time, it usually is permitted to take up to 45
card statement. This will help you make the best       days to complete the investigation – but only if
use of your rights under federal law to dispute er-    the money in dispute is returned to your account
rors and avoid liability for unauthorized transfers.   and you’re notified promptly of the credit. At
                                                       the end of the investigation, if no error has been
Errors                                                 found, the institution may take the money back
You have 60 days from the                                                     if it sends you a written
date a periodic statement                                                     explanation.
containing a problem or              If your credit card is lost or
error was sent to you to             stolen, you can’t lose more An error also maya occur in
                                                                               connection with point-
notify your financial institu-
tion. The best way to protect         than $50. If someone uses of-sale purchase with a
yourself if an error occurs –                                                  debit card. For example,
                                       your ATM or debit card                  an oil company might give
including erroneous charges
or withdrawals from an ac-         without your permission, you you a debit card that lets
count, or for a lost or stolen                                                 you pay for gas purchases
                                          can lose much more.                  directly from your bank
ATM or debit card – is to
notify the financial institu-                                                  account. Or you may have
tion by certified letter, return receipt requested, so a debit card that can be used for various types of
you can prove that the institution received your       retail purchases. These purchases will appear on
letter. Keep a copy of the letter for your records.    your periodic statement from the bank. In case
                                                       of an error on your account, however, you should
    If you fail to notify the institution of           contact the card issuer (for example, an oil com-
    the error within 60 days, you may have             pany or a bank) at the address or phone number
    little recourse. Under federal law, the            provided by the company. Once you’ve notified
    institution has no obligation to con-              the company about the error, it has 10 business
    duct an investigation if you’ve missed             days to investigate and tell you the results. In this
    the 60-day deadline.                               situation, it may take up to 90 days to complete an
Once you’ve notified the financial institution         investigation, if the money in dispute is returned
about an error on your statement, it has 10 busi-      to your account and you’re notified promptly of
ness days to investigate. The institution must tell    the credit. If no error is found at the end of the
you the results of its investigation within three      investigation, the institution may take back the
business days after completing it and must correct money if it sends you a written explanation.
6 FTC Facts For Consumers

Lost or Stolen ATM                                       circumstance, such as lengthy travel or illness, it
or Debit Cards                                           must reasonably extend the notification period. In
If your credit card is lost or stolen, you can’t lose    addition, if state law or your contract imposes li-
more than $50. If someone uses your ATM or               ability limits that are lower than under the federal
debit card without your permission, you can lose         EFT act, those lower limits apply.
much more.
                                                         Once you report the loss or theft of your ATM
If you report an ATM or debit card missing to            or debit card to the card issuer, you’re no longer
the institution that issues the card (card issuer)       responsible for additional unauthorized transfers
before it’s used without your permission, you            occurring after that time. Because these unauthor-
can’t be held responsible for any unauthorized           ized transfers may appear on your statements,
withdrawals.                                             however, you should carefully review each state-
                                                         ment you receive after you’ve reported the loss or
If unauthorized use occurs before you report it,
                                                         theft. If the statement shows transfers that you
the amount you can be held responsible for de-
                                                         did not make or that you need more information
pends upon how quickly you report the loss to the
                                                         about, contact the card issuer immediately, using
card issuer.
                                                         the special procedures it provided for reporting
 QQ   If you report the loss within two business         errors.
      days after you realize your card is missing, you
      won’t be responsible for more than $50 for         Overdrafts for One-Time
      unauthorized use.                                  Debit Card Transactions and
                                                         ATM Cards
 QQ   If you fail to report the loss within two busi-    If you make a one-time purchase or payment with
      ness days after you realize the card is missing,   your debit card or use your ATM card and don’t
      but do report its loss within 60 days after your   have the funds to cover it, an overdraft can occur.
      statement is mailed to you, you could lose as      Your bank must get your permission to charge you
      much as $500 because of an unauthorized            a fee to pay for your overdraft on a one-time debit
      transfer.                                          card transaction or ATM transaction. They also
                                                         must send you a notice and get your opt-in agree-
 QQ   If you fail to report an unauthorized transfer
                                                         ment before charging you for this purpose.
      within 60 days after the card issuer mails your
      statement to you, you risk unlimited loss. For     For accounts that you have already, if you don’t
      example, you could lose all the money in that      opt-in, the transaction usually will be declined
      account, the unused portion of your maxi-          if you have insufficient funds to pay it, and you
      mum line of credit established for overdrafts,     cannot be charged an overdraft fee. If you open a
      and possibly other amounts.                        new account, the bank also cannot charge you an
                                                         overdraft fee for your one-time debit card or ATM
If you failed to notify the card issuer within the
                                                         transactions, unless you opt-in to the fees. The
time periods allowed because of an extenuating
                                                         bank will give you a notice about opting-in when
                                                                          FTC Facts For Consumers 7

you open the account, and you can decide your             want to shop around to be sure you’re getting the
preference. If you do opt-in, be aware that you           best “stop-payment” terms available.
have the right to cancel the agreement at any time.
If you do not opt-in, you can reconsider later and        Other Rights
change your decision.                                     The EFT Act protects your right of choice in two
                                                          specific situations regarding use of electronic fund
These rules do not apply to recurrent payments            transfers. First, generally the Act prohibits finan-
that you set up for making regular debits to your         cial institutions from requiring you to repay a loan
account. For those transactions, your bank can            by preauthorized electronic transfers. Second, if
still enroll you in their usual overdraft coverage.       you’re required to receive your salary or govern-
If you prefer not to have that coverage (and the          ment benefit check by EFT, you have the right
fees), contact your bank and see if they will let you     to choose the institution that will receive these
discontinue it for those payments.                        funds.
Limited Stop-Payment                                      Suggestions
Privileges                                                If you decide to use EFT, keep these tips in mind:
When you use an electronic fund transfer, the
                                                           QQ Take care of your ATM or debit card. Know
EFT Act does not give you the right to stop pay-
ment. If your purchase is defective or your order is           where it is at all times; if you lose it, report it
not delivered, it’s as if you paid cash. That is, it’s up      as soon as possible.
to you to resolve the problem with the seller and          QQ Choose a PIN for your ATM or debit card
get your money back.                                           that’s different from your address, telephone
There is one situation, however, when you can                  number, Social Security number, or birthdate.
stop payment. If you’ve arranged for regular pay-              This will make it more difficult for a thief to
ments out of your account to third parties, such               use your card.
as insurance companies, you can stop payment if            QQ Keep and compare your receipts for all types
you notify your institution at least three business            of EFT transactions with your periodic state-
days before the scheduled transfer. The notice may             ments. That way, you can find errors or unau-
be oral or written, but the institution may require            thorized transfers and report them.
a written follow-up within 14 days of the oral
notice. If you fail to provide the written follow-up, QQ Make sure you know and trust a merchant or
the institution’s responsibility to stop payment               other company before you share any bank ac-
ends.                                                          count information or pre-authorize debits to
                                                               your account. Be aware that some merchants
Although federal law provides only limited rights              or companies may use electronic processing of
to stop payment, individual financial institutions             your check information when you provide a
may offer more rights or state laws may require                check for payment.
them. If this feature is important to you, you may
8 FTC Facts For Consumers

 QQ   Review your monthly statements promptly               The FTC works to prevent fraudulent, deceptive
      and carefully. Contact your bank or other             and unfair business practices in the marketplace
      financial institution immediately if you find         and to provide information to help consumers
      unauthorized transactions and errors.                 spot, stop and avoid them. To file a complaint
                                                            or get free information on consumer issues,
Where to File Complaints                                    visit or call toll-free, 1-877-FTC-HELP
If you think a financial institution or company             (1-877-382-4357); TTY: 1-866-653-4261.
has failed to fulfill its responsibilities to you
under the EFT Act, you may wish to com-                     Watch a video, How to File a Complaint, at
plain to the appropriate federal agency. Visit     to learn more. The FTC enters, a site maintained by                consumer complaints into the Consumer Sentinel
The Office of the Comptroller of the Currency.              Network, a secure online database and investiga-
This site provides answers to more than 250                 tive tool used by hundreds of civil and criminal
frequently-asked questions on topics like bank ac-          law enforcement agencies in the U.S. and abroad.
counts, deposit insurance, credit cards, consumer
loans, insurance, mortgages, identity theft, and
safe deposit boxes.

                                               Federal Trade Commission
                                            Bureau of Consumer Protection
                                     Division of Consumer and Business Education

                            For The Consumer                Federal Trade Commission

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